Which of the following activities will increase profits?<...
Which of the following activities will increase profits?
Depreciation charges
Reduction in provision for doubtful debts
Undervalued closing stock
Returns inwards
Correct answer is B
The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivable (credit sales) that have been issued but not yet collected.
If a business estimated 20,000 as bad debts, a reduction to a lesser amount means the business will make more money from sales, which amounts to higher profits.
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\(\begin{array}{c|c} \text{Capital} & 12,700 & \text{Purchases} & 7,100 \\ \hline \text{...
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